Chapter 26 Hedge Funds Answer Key
Multiple Choice Questions
1.
______ are the dominant form of investing in securities markets for most individuals, but
______ have enjoyed a far greater growth rate in the last decade.
2.
Like mutual funds, hedge funds
3.
Unlike mutual funds, hedge funds
Topic: Hedge Funds
4.
Alpha seeking hedge funds typically ______ relative mispricing of specific securities and
______ broad market exposure.
5.
Hedge funds ______ engage in market timing ______ take extensive derivative positions.
Topic: Hedge Funds
6.
The risk profile of hedge funds ______, making performance evaluation ______.
7.
Shares in hedge funds are priced
8.
Hedge funds are typically set up as ______ and provide ______ information about portfolio
composition and strategy to their investors.
9.
Hedge funds are ______ transparent than mutual funds because of ______ strict SEC
regulation on hedge funds.
10.
______ must periodically provide the public with information on portfolio composition.
11.
______ are subject to the Securities Act of 1933 and the Investment Company Act of 1940
to protect unsophisticated investors.
12.
Hedge funds traditionally have ______ than 100 investors and ______ to the general public.
13.
Hedge funds differ from mutual funds in terms of
14.
Hedge funds may invest or engage in
15.
Hedge funds are prohibited from investing or engaging in
16.
Hedge funds often have ______ provisions as long as ______, which preclude redemption.
17.
Hedge fund strategies can be classified as
18.
A hedge fund pursuing a ______ strategy is betting one sector of the economy will
outperform other sectors.
19.
A hedge fund pursuing a ______ strategy is attempting to exploit temporary misalignments
in relative pricing.
20.
A hedge fund pursuing a ______ strategy is trying to exploit relative mispricing within a
market, but is hedged to avoid taking a stance on the direction of the broad market.
21.
An example of a ______ strategy is the mispricing of a futures contract that must be
corrected by contract expiration.
22.
A hedge fund attempting to profit from a change in the spread between mortgages and
Treasuries is using a ______ strategy.
23.
If the yield on mortgage-backed securities was abnormally high compared to Treasury
bonds, a hedge fund pursuing a relative value strategy would
24.
Assume newly issued 30-year-on-the-run bonds sell at higher yields (lower prices) than
29½–year bonds with a nearly identical duration. A hedge fund that sells 29½-year bonds
and buys 30-year bonds is taking a
25.
A bet on particular mispricing across two or more securities, with extraneous sources of
risk such as general market exposure hedged away, is a
26.
Assume newly issued 30-year-on-the-run bonds sell at higher yields (lower prices) than
29½–year bonds with a nearly identical duration. A hedge fund that sells 29½-year bonds
and buys 30-year bonds is taking a
27.
If the yield on mortgage-backed securities was abnormally low compared to Treasury
bonds, a hedge fund pursuing a relative value strategy would